German Landlord Said to Face Dissent in CEO Investor Vote

By Dalia Fahmy -
Jun 18, 2013

GSW Immobilien AG (GIB), Berlin’s largest
residential landlord by market value, will be opposed by some
shareholders today in a vote over how it handled the hiring of
its chief executive officer, according to five of the investors.

At the annual shareholder meeting, investors will vote on a
no-confidence motion that challenges the April appointment of
CEO Bernd Kottmann, according to the agenda. They will also vote
on whether to dismiss Chairman Eckart John von Freyend, who
supervised Kottmann’s recruitment.

Regardless of the outcome, the meeting will put pressure on
GSW to improve its corporate governance, said PGGM NV, the Dutch
pension administrator that called for the vote, and four other
investors that asked not to be named. Together, the five
companies own about 13 percent of the shares.

“It’s a signal to the sector as a whole that transparency
is becoming increasingly important and investors will demand
improvements,” said Hans Op ’t Veld, head of listed real estate
companies at PGGM. “We’re still the ultimate owners of the
capital and the company should pay attention to us.”

GSW has declined 12 percent since PGGM called on Kottmann
to quit on May 15, greater than the 8.7 percent decline in the
EPRA FTSE/NAREIT index of German property stocks. The company’s
shares will probably continue to lag behind other real estate
stocks if the vote is close, shareholders said.

‘Uncomfortable’ Investors

“Investors are uncomfortable with the situation and that’s
what’s caused the underperformance,” Op ’t Veld said.

GSW, which owns 60,000 apartments in Berlin, said on March
18 that Kottmann would succeed Thomas Zinnoecker as CEO on April
16. The appointment was made about a week after GSW announced
Zinnoecker’s departure.

PGGM said the short gap between the two events raised
questions about whether the search was thorough. The Dutch
company also criticized Kottmann and Freyend for their track
record at IVG Immobilien AG (IVG), a German real estate company.

PGGM’s proposal to oust the chairman must be approved by 75
percent of shareholders present at the meeting in Berlin. The
no-confidence motion in the CEO must be passed by 50 percent of
the voters.

There will probably be enough votes to remove the chairman,
though the tally may be close, Peter Papadakos, London-based
analyst at Green Street Advisors, said last week.

“The current chairman has allowed a situation to develop
in which the perception exists -- whether true or not -- of
potential conflicts of interest,” Papadakos wrote in a report
on June 6, in which he advised clients to oust Freyend.

“There was a careful and systematic selection process with
clear qualification requirements,” Freyend said by phone on
June 7.

GSW took more than four weeks to find a CEO, which is
longer than the public announcements reflect, Freyend said at
the time.